OpCo Patent Sales Triggered More NPE Litigation in Q1 and Primed the Pump for Further Campaigns

RPX data on the origins of asserted patents show that the vast majority of patent litigation has consistently involved patents originating with operating companies. This trend persisted into Q1 and includes NPE litigation. As shown below, NPEs far more often assert patents originating with operating companies (shown below in light blue) than homegrown NPE assets (shown in orange). About 85% of the patent litigation filed in any given year from 2005 onward has involved at least some operating company patents, including litigation filed by operating companies (in dark blue, comprising about 30-40% of defendants added in recent years) as well as the light blue NPE litigation over former operating company assets (comprising 35-45%).

Defendants Added to District Court Litigation by Patent Origin

Note: Excludes declaratory judgment and design patent litigation. Operating company patents include those originating with universities as well as non-NPE individuals not working under the auspices of a company.

The flow of operating company patents to NPEs may accelerate as a result of COVID-19. Per prior RPX coverage, if past is precedent, the financial crisis triggered by the pandemic may well be followed by years of increased patent divestments by operating companies as those patent owners face pressure to preserve and augment balance sheet cash, with some of those assets ending up in NPE hands. One result of that activity could very well be a further rise in NPE litigation.

Indeed, such transactions continue to fuel NPE activity today, with some divestments sparking new assertion campaigns in the first quarter of 2021. Among that litigation is the network security campaign launched in February by Cybersoft IP LLC, a subsidiary of patent monetization firm Dynamic IP Deals, LLC (d/b/a DynaIP), over patents acquired earlier that month from operating company CyberSoft, Inc.

Meanwhile, in early March, 2BCom, LLC, an NPE that has targeted automakers as well as networking companies with litigation over former Toshiba patents, received yet more patents from the Japanese conglomerate. That assignment, which includes patents related to wireless communications, could signal a plan to “refresh” a campaign that saw a string of dismissals in late 2020. Also during the first quarter of 2021, Scramoge Technology Limited—an Irish NPE linked by public records to the hedge fund Magnetar Capital—received over 120 US patent assets from LG Innotek, including assets related to wireless charging and NFC communications.

Other operating company-to-NPE divestments executed in Q1 include patents related to semiconductors. In late February, fabless chipmaker NEWRACOM assigned hundreds of patent assets to Atlas Global Technologies LLC, a subsidiary of Acacia Research Corporation. Additionally, IPValue Management (d/b/a IPValue) subsidiary Future Link Systems, LLC acquired another set of patents from NXP Semiconductors in mid-January, after filing its first litigation in late 2020 over patents from the same source.

See RPX’s first-quarter review for more on other trends impacting the patent marketplace and patent litigation.